Our role in promoting foreign trade
As a subsidiary of the promotional bank KfW we are committed to the German and European economy. For around 60 years we have been supporting the export economy in many different ways.
Our medium and long-term financing solutions are tailored to the specific needs of our customers who range from internationally oriented large companies to medium-sized enterprises.
On behalf of the German federal government we implement three export promotion programmes:
- the to finance German exports to developing and emerging countries
- the to support the German shipbuilding industry
- the which supports loans to finance German exports in African buyer countries
Our know-how as an experienced specialist financier
Less risk in export business? Best try it with insurance!
Interview with Dr Nadja Marschhausen, Head of Structuring Advisory at KfW IPEX-Bank
With goods and services valued at EUR 1.3 trillion, Germany exported more in 2018 than ever before in its history. The Federal Government also supports German exports – for example, through guarantees provided by the export credit insurer Euler Hermes Deutschland, which has a mandate to carry out this task. "These are an important building block in the area of export finance," said Dr Nadja Marschhausen, Head of Structuring Advisory at KfW IPEX-Bank, speaking in an interview.
Is Germany's title as “export world champion” still a foregone conclusion and is it more likely to endure than the title of football world champion?
The Chinese already took over our position as the world's leading exporter in 2008. But we are still playing in the Champions League; we are an important export nation, and exports are still the engine driving our economy and jobs in Germany. This is why all the efforts to promote exports through policy are extremely important. Every fourth job is dependent on exports. It is not something that can be taken for granted and requires a lot of hard work: German companies must produce goods that the global market considers attractive both as products and in terms of price. The government can then support them in their endeavours to venture abroad with suitable instruments, such as export credit insurance. This export credit insurance is handled by Euler Hermes Aktiengesellschaft on behalf of the Federal Republic of Germany as mandatary of the Federal Government.
How does ECA cover work?
ECA cover is a tool to promote foreign trade. It is a form of state insurance which provides banks with cover for borrower default: If a borrower fails to keep up with its payments to the bank, the ECA insurance steps in. In the event of default, the bank pays a deductible, which is normally 5 % of the loan amount.
What is the benefit for exporters?
It is easier for them to sell their products, since the foreign buyer normally needs debt capital to purchase goods and services. Banks often only provide this with an appropriate level of cover. Especially in the case of exports to countries where access to financing is difficult, the export financing sometimes only comes about when ECA cover is provided.
Let's imagine a company wants to export a special machine for an industrial plant in China; how does it work?
The Chinese buyer usually asks for a financing offer from a bank to be enclosed with the quote so he can assess the total costs of the export transaction. The exporter then contacts KfW IPEX-Bank – we review whether financing is generally feasible. It would have to involve German or European deliveries, services or goods, for example. In the second step, we assess the financial situation of the buyer in China to determine whether he can repay the loan without any problems. It is also important that any necessary environmental and social impact assessments are initiated at an early stage. If the exporter ultimately reaches an agreement with the Chinese buyer, our experts will handle the application for export credit insurance with Euler Hermes. After the loan agreement between KfW IPEX-Bank and the Chinese buyer has been negotiated and signed, the export credit is ready for disbursement for the order to China. The exporter then receives the money from us to deliver the machine.
Are there countries where investment is particularly difficult?
Emerging and developing countries in particular tend to be affected by crisis hotspots, instability and greater risks for the handling of foreign trade. At the same time, there are new business opportunities and potential for growth compared to established markets. Africa and especially the G20 Compact with Africa initiative is a classic example: the African continent is traditionally more of a sales market and supplier of raw materials. What is needed for the future, however, is an equal and long-term partnership with the same benefits for all parties. This includes improving the conditions for trade and private investment while simultaneously paving the way for jobs and prosperity for the population.
Is export credit also a form of development aid, because otherwise no one would invest in these countries?
They help to ensure that domestic industry develops there, which contributes to local prosperity. For example, the expansion of Ethiopia's rail infrastructure or the construction of Ethiopian Airlines' new state-of-the-art cargo terminal in Addis Ababa are long-term investments we financed that help the country.